Testing the pecking order theory of capital structure: Evidence from Turkey using panel quantile regression approach

YILDIRIM, Durmus; Çelik, Ali Kemal

doi:10.1016/j.bir.2020.11.002

Cited by 20 publications

(22 citation statements)

References 31 publications

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“…Drake and Fabozzi [2] explain that the sources of capital are divided into three types: retained earnings, banking, and financial markets. Companies with high debt levels tend to choose to finance from equity, while companies with low leverage seek funding from banks [3]. Each source of funding has different consequences for the company's financial condition.…”

Section: Introductionmentioning

confidence: 99%

Achieving Sustainable Economic Growth: Analysis of Islamic Debt and the Islamic Equity Market

et al. 2021

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The financial sector is divided into two broad categories: equity and banking markets. The healthy functioning of these sectors plays an imperative role in any economy. This study aimed to examine the short- and long-term relationship between the Islamic financial sector (Islamic debt and Islamic equity market), and sustainable economic growth of the two economies with the largest Muslim populations. Quarterly data were collected from 2010 to 2019 for Indonesia and Pakistan. The study used autoregressive distributive lag (ARDL) and the error correction method (ECM). The results revealed that in the long run, the Islamic banking sector imparts a significant and positive effect on achieving sustainable economic growth in both countries. However, in the short run, the Islamic stock market was found to have a positive relationship with Pakistan, while the Islamic banking sector had a positive and significant relationship with economic growth in Indonesia.

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Section: Introductionmentioning

confidence: 99%

Achieving Sustainable Economic Growth: Analysis of Islamic Debt and the Islamic Equity Market

et al. 2021

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“…After the publications of F. Modigliani and M.H. Miller (Modigliani and Miller 1958;Modigliani and Miller 1963), a discussion arose on the basis of which the static trade-off theory (Yıldırım and Çelik 2020;D ąbkowska 2016) was born. According to the indicated theory, a company should maintain solid investment plans and assets (Mursalim and Kusuma 2017).…”

Section: Discussionmentioning

confidence: 99%

“…S.C. Myers (1984) noted that enterprises prefer internal sources of financing that take the cost of resourses into account (Anton and Afloarei Nucu 2021), this was confirmed by the research carried out by Duran and Stephen (2020), for example, which was conducted for five countries in Latin America (Argentina, Brazil, Chile, Mexico, and Peru). If the funds that are obtained from these sources as well as those from external financing sources other than capital sources are insufficient, external sources of debt financing are used (Mokhova and Zinecker 2014), with enterprises preferring lowrisk debt (Yıldırım and Çelik 2020). Therefore, companies will use the retained profits whenever possible (Vo 2021).…”

Section: Discussionmentioning

confidence: 99%

Impact of Capital Structure on Corporate Value—Review of Literature

Kruk

2021

JRFM

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The issue of capital structure in an enterprise is often described in the literature on the subject; however, theories are classified into various approaches, and their characteristics are often limited to selected theories. This work is an attempt at a synthetic presentation of the theory of capital structure. The aim of the article was to review and try to organise the most important theories of capital structure, paying attention to the influence of capital structure on the processes of creating value. The paper also highlights the most important theoretical works in this area. The study consists of two main parts. The first part indicates the diversity of defining the concepts of capital structure and indicates the approaches in classifying this structure. The second part characterises the theories of capital structure in the context of value creation. Based on the presented theories, it can be stated that there is no agreement as to whether and to what extent capital structure translates into the process of creating enterprise value. Therefore, it seems justified to conduct appropriate empirical research in this respect.

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“…Moreover, the company's funding needs can come from the need for investment. Yıldırım and Çelik (2021) used POT to evaluate the relative substance of external and internal funding sources in financing the company's investment. They found that highly leveraged companies chose equity financing at high investment when internal funds were restricted to finance investment spending.…”

Section: Pecking Order Theory (Pot)mentioning

confidence: 99%

“…They found that highly leveraged companies chose equity financing at high investment when internal funds were restricted to finance investment spending. In addition, companies with low leverage better use debt as a source of funding for their investments (Yıldırım & Çelik, 2021). On this basis, the current researchers employed the POT to explain investment decisions in fixed assets.…”

Section: Pecking Order Theory (Pot)mentioning

confidence: 99%

Fundamental Factors of Financial Ratios and Discretionary Accruals in Influencing the Companies’ Fixed-Asset Investment Decisions

Rosa

Mukhibad

2022

JAI

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Research aims: This study aims to empirically prove the influence of profitability, solvency, liquidity, activity, dividend policy, and discretionary accruals on fixed-asset investment decisions.Design/Methodology/Approach: The researchers used consumer goods companies listed on the Indonesia Stock Exchange (IDX) from 2013 to 2019. Using the purposive sampling method, this study resulted in 163 bank-year observations. The data were then analyzed utilizing a fixed-effect model.Research findings: The results showed that profitability, liquidity, activity, and discretionary accruals positively affected fixed-asset investment. Meanwhile, the dividend policy negatively affected fixed-asset investment. This study strengthens the pecking order theory. In addition, the research sample used internal funds as a funding source for investment in fixed assets.Theoretical contribution/Originality: The variable added in the study distinguishing it from previous researchers is the discretionary accrual variable. Discretionary accruals have been proven to impact resource allocation, one of which is investment decisions. The additional discretionary accruals variable is expected to strengthen the influence of the consumer goods companies' fundamental factors on investment decisions in fixed assets.Practitioner/Policy implication: Investment in fixed assets in the consumer goods companies uses internal funds because these funds are low risk and support the company's sustainability.Research limitation/Implication: This study used dividend policy as one of the independent variables, and companies that did not distribute dividends could not be sampled.

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Testing the pecking order theory of capital structure: Evidence from Turkey using panel quantile regression approach

Cited by 20 publications

References 31 publications

Achieving Sustainable Economic Growth: Analysis of Islamic Debt and the Islamic Equity Market

Achieving Sustainable Economic Growth: Analysis of Islamic Debt and the Islamic Equity Market

Impact of Capital Structure on Corporate Value—Review of Literature

Fundamental Factors of Financial Ratios and Discretionary Accruals in Influencing the Companies’ Fixed-Asset Investment Decisions

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